It's a quiet morning as the Street grapples with all the Sunday talk show stuff, yet another shot across the bow from President Obama on the notion of government cutting spending. Toss in comments from Nancy Pelosi on the fact $600.0 billion in taxes isn't enough, and somehow democrats will extract more from the pockets of Americans.

Therein is the real story; this government's voracious appetite for spending means it must go after people that are decidedly middle income.

The way it will work is there will be an attack on taking away tax breaks for oil companies, breaks awarded to companies for hiring Americans, and other small potato taxes as cover. That cover or smokescreen will be just like the one that saw a fiscal cliff deal to take from the rich and smack everyone with higher taxes via the hike in payroll taxes. Also, keep in mind there was another big tax on families earning $300,000. The loss of personal exemptions of $3,800 per family member equals a 4.4 percentage point tax hike on a family with two children and 6.0% on a family with four children.

At the same time, according to Stephen Moore's piece in today's Wall Street Journal, Speaker Boehner has drawn a line in the sand on more tax hikes, flatly saying there will be no more during the next two years. Instead he plans to fight for spending cuts, perhaps focusing on the sequester as the battlefield is in a twist because everyone thought this was an area republicans would vigorously defend. There are many republicans that also want to use the debt ceiling as the backdrop for a more sensible approach to fixing the dark clouds on the horizon. While others think it's the continuing resolution.

In the meantime, that same article notes President Obama doesn't think America has a spending problem.

I hope you had a good New Year start because it's back to the anxiety and concern from Washington.

A Cautious Start to the Session
Carlos Guillen

Equity markets are beginning the first full trading week of the year on a very cautious note as reflected by Dow Jones Industrial Average futures, which are indicating a slightly negative start, down 17 points.

Last week, we saw the culmination to the Fiscal Cliff dilemma, and stocks rallied as a result, but the fight in Washington is still not over as politicians will now face the next challenge, the infamous debt ceiling. As its name would suggest, the debt limit is simply the maximum amount that the U.S. government can borrow at any given time. Currently, the limit is set at $16.394 trillion. In the next few weeks, Congress must decide whether to raise the debt ceiling. Under law, the debt ceiling limits the U.S. Treasury's authority to borrow money to pay for decisions already enacted by Congress and the president. In other words, the government needs Congress's approval to raise money to pay its bills.

If Congress fails to raise the debt limit, America will once again face default. Back in 2011, the debate over raising the debt limit caused Standard & Poor's to cut America's credit rating down a notch from AAA, and this resulted in markets around the world spiking lower. Similar to the Fiscal Cliff debates, we can expect the Debt Ceiling fight to get progressively intense all the way to the very end, once again causing equity markets to gyrate.

Tomorrow marks the beginning of the next round of earnings season. Given the entire fiasco with the Fiscal Cliff, the elections, and some of the consequences of the Sandy Super-storm, we can expect earnings to land all over the place. As it stands, earnings growth estimates for the S&P 500 have been ramping lower for the fourth quarter to 2.7 percent from 9.2 percent. Quite remarkably, markets have made gains despite the negative trend in growth expectations for the fourth quarter. The question now is, will markets keep these gains as companies surprise on earnings results and as the Debt Ceiling debates unfold? That remains to be seen.

Comments

This is sad because we don't have a choice but to raise the debt ceiling or the pres. will cut SS and military pay before anything else if anything at all. I myself say hold the line on spending while there is still time. There is no reasoning with this pres. Wilfred Kearton on 1/7/2013 10:04:34 AM

Time to stand firm on tax hikes and force spending cuts. It's also time to start an avertising campaign in the media to counter and destroy the "fair share" myths being promoted by Obama and the Democrats about our tax code, the economy and the so-called rich. We need to rally around the conservatives and "fight to the death" on this issue as we are already beaten, bloodied and have nothing else to lose. I am not going to be complacent about his anymore....I'm getting angry over the socialist/communist rhetoric from Obama and the Democrats. We are moving assets out of the U.S. to preserve our hard earned wealth while we still can. Bill Bahlburg on 1/7/2013 10:23:54 AM

Another nuclear class tool is the AUDIT!!!The IRS can simply declare you owe money and many times you pay it out of fear of whatever else they can allege. On the streets this is called extortion. Z Z on 1/7/2013 10:36:34 AM

They will target the mortgage interest deduction, because now homeowners are "rich" and they don't deserve a break on their taxes - it is all part of the concerted agenda to proletariatize the US population and turn our country into a totalitarian soviet state Gray Smith on 1/7/2013 10:48:53 AM

The administration will no doubt increase fees, licence costs, inspection fees, etc. These may not seem like big dollars but they add up quickly and multiply one on top of another which adds to the cost of everthing we buy. The consumer pays these hidden taxes and doesn't even recognize them. They just think the greedy corporations are raising the prices to gouge the "middle class." James Johnson on 1/7/2013 11:06:12 AM

We need to start living with in our income and not barrow from our great-great grand children. Responsibility should be our first job to our children and government. Bill Snedecor on 1/7/2013 11:28:55 AM

I am betting on The Big ZerO staying true to his character. He has proven that belief in God and charitable giving are not part of his life, and he has contempt for both groups. His contempt for Christians is evident in all his policies. His contempt for charitable giving shows in that he has virtually none in his tax returns and in his policies where charities compete with his goal to enslave the populace with government entitlements. Therefore, I believe step one will be to disallow deductions for charitable giving through legislative bullying. If that fails, he will use his executive authority to do away with those deductions on a practical basis by re-interpreting the tax codes and excluding first fringe churches, and eventually all churches. If he must go the latter route, he will probably lose eventually in the courts. Unfortunately, that will not be until after he has once again moved the mindset of the country away from its roots and to its detriment. Bob G on 1/7/2013 11:53:24 AM

If you have employer sponsored healthcare, the employer paid portion will be counted in your employee compensation and taxed accordingly. Jim Zeh on 1/7/2013 1:24:46 PM

The low hanging fruit for Obama is to squeeze higher income earners by getting rid of more and more deductions. That will be easy for him since it was the Republicans that came up with limiting deductions in the first place (they just didn't realize I suppose that once you raise rates that allowing limitations on deductions is de facto another tax increase). The real money pot is in a National Sales Tax. They won't call it a VAT like Europe because they want everyone to think we are not becoming Europe. I guess that is right - we are becoming Greece. They will exempt food and other "essentials" like drugs for the poor etc. There will be a huge carve out for those that don't pay taxes and the NST will be imposed on the middle class and above. Michelle J on 1/7/2013 2:24:47 PM

Four percent nonparticipant tax to be levied against individuals [U.S. citizens only - all others exempt] not participating in at least one federal entitlement program. This revenue source is necessary to offset lack of mass cover screening for graft and fund skimming which would have been provided by the individual's enrollment in at least one federal entitlement program. Patricia Flynn on 1/7/2013 3:14:05 PM

Soon you will pay a tax for having a baby. It ties in perfectly with the anti-family theme the democrats represent. steve sams on 1/7/2013 5:50:51 PM

Why is know one ever talk about the 46 million or so who pay nothing and live basically for free where is that ever going to end or just get bigger chip c on 1/8/2013 9:59:24 AM

Trying to e/m charles about the fair tax plan. The only thing that will save us! bob genung on 1/12/2013 10:49:05 AM

As long as the "Government" keeps thinking that they are now "monarchists", they will keep doing whatever they want. They do not fear the People, they want us to fear them. It's time to make them abide by the Constitution. 10% Flat tax on everyone. You make 1 dollar, you pay .10 cents, $1,000,000, $100,000. Simple. To much double talk. 10% if the easiest way, no accountant because there will be no loopholes. Frank Gonzalez on 1/13/2013 12:35:40 PM

Hi Charles, Fees, instead of "taxes", the lingo wll change. Fees, Fees and who knows what other lingo they will attach. A. Smith on 1/14/2013 11:22:23 AM

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